Russia's Price for Buying Off Ukraine: $15B

Let us update this strange tale of Ukraine. Having told his opponents to in effect get lost since they didn't win any elections or succeed in gaining a vote of no-confidence, President Viktor Yanukovych headed to the Kremlin to speak to his Russian counterpart Vladimir Putin. What is the price of fealty to Russia? Gulf Cooperation Council bigwigs bought off Egypt for $9.9 billion (so far)--$5B from the Saudis and $4.9B from the Emiratis to wean it off the upstart Qataris. Meanwhile, Yanukovych was able to wangle a $15B bailout from Russia to buy that much worth of Ukrainian sovereign debt over the next two years. Not bad, eh?

Ukraine sealed $15 billion of Russian financing and a one-third
discount on energy imports from its neighbor as anti-government
protesters in Kiev demanded to know what President Viktor Yanukovych had
ceded in return. Russia
will buy government debt this year and next and will cut the price it
charges for natural gas to $268.5 per 1,000 cubic meters, President
Vladimir Putin said today after meeting Yanukovych in Moscow.

Ukrainian debt--certainly more than mildly distressed at this point--is slightly more relaxed as a result:

The yield on Ukrainian dollar bonds due 2023 plunged more than 1
percentage point to 8.833 percent as of 7:11 p.m. in Kiev, the lowest
since June 17, data compiled by Bloomberg show. The yield on government
debt due 2014 fell more than 6 percentage points to 15.193 percent. Putin
said the financing is being provided in light of “the problems of the
Ukrainian economy linked to the world financial crisis, and to support
the budget of the Ukrainian government.” Trade restrictions on Ukrainian
goods will also be lifted.

However, the opposition may be further inflamed by the Russian bailout. Alike Saudi Arabia and the UAE lending, Russia lending is not exactly a "seal of good housekeeping" alike that granted by the IMF which opens doors to unbiased lending from more impartial sources:

“The shift towards Moscow risks inflaming the anti-government protests,” Capital’s Chief Emerging Markets
Economist Neil Shearing said by e-mail. “While a deal with Russia was
always likely to offer the best terms on short-term financing, closer
ties with the EU were more likely to provide an anchor for the
structural reforms needed to reinvigorate Ukraine’s faltering economy.”

Ukraine’s
opposition had planned a rally for this evening and protesters flocked
to Independence Square on hearing news of the Russian agreements. There
were about 30,000 people there as of 7:30 p.m., according to The
RBC-Ukraine news service. The Interior Ministry put the turnout at about
8,000.

“What did Yanukovych promise in exchange?” said
57-year-old Vera from Kiev, who declined to give her last name. “Nobody
gives anything without a reason. Now we have only questions.” Opposition leaders addressing the crowds, who’ve blocked central Kiev
since the government pulled out of a planned European Union association
agreement, were similarly skeptical. “I know only one place where there’s free cheese -- a mouse trap,” said
Arseniy Yatsenyuk, head of jailed ex-Prime Minister Yulia Tymoshenko’s
party. “We want to hear what he gave in return.”

Your country's been sold, my friend. Collusion between Yanukovych and Putin reminds me of a gangster movie (not "gangsta," homey) with a dodgy plot and poor acting. Except in this case it's true-to-life. Most importantly, I hardly think it's solved its balance-of-payments issues by getting into bed with the country that's done quite a lot to exacerbate its situation by blocking trade and threatening to cut off gas supplies during winter. First, there's no guarantee this lifeline will be continued if Ukraine shows signs of disobedience. Second, Ukraine's habit of burning foreign exchange is hardly stopped by a lender with many strings attached showing up.